At Traderís Way, Prime online Forex and CFD broker, we ensure that our clients are able to take advantage of even the smallest trend in the market by providing them with state of the art trading terminals, trading apps along with some of the most competitive trading conditions in the market. As part of our outreach, here is a brief recap on CFDís Ė the agreement between two parties where they agree to exchange the difference in rates between the opening and closing prices of a contract at the time of closure of the contract, with the difference multiplied by the number of units as specified in the contract. A CFD is a derivative that is linked to the underlying asset price and involves no physical delivery of any sort. Essentially when a trader trades online, he does not buy or sell any asset; in other words, if a trader goes long on EUR USD he does not physically buy and sell euros and dollars. The trader deals in CFDís wherein he enters into a contract that he will either receive or pay the difference in the rates multiplied by the number of units, at the time of contract closure.
Example: Sam opened 1 standard lot of EURUSD long (that is, Sam bought 100,000 EUR-versus-USD CFDs). At the time of Sam's purchase, the current rate was 1.3000. Sam has just closed and the closing rate was 1.4000. When he closed, Sam made a profit = (1.4000 - 1.3000) x 100,000 = 10,000 USD.
For more information on CFDs, please check out Traderís Way.